1031 Exchange for a Dollar Store Net Lease (NNN) Property

Renewals belong to the tenant, so the primary term left on your lease is the asset you are selling

Dollar General's fiscal 2025 Form 10-K says most of its stores are leased, that many stores, including a significant portion of new stores, carry a primary lease term of up to 15 years with multiple renewal options, that some stores have shorter leases, and that exercising renewal options is at the company's sole discretion. Its weighted-average remaining lease term was 9.1 years at January 30, 2026.

Dollar Tree's fiscal 2025 Form 10-K is more direct: it leases substantially all of its roughly 9,000 U.S. stores, and its leases typically provide a short initial term, generally between five and ten years, with options to extend, a strategy it says preserves flexibility as markets change. The same filing reports that it completed the sale of the Family Dollar business on July 5, 2025, generating about $793 million of cash.

Put together, a landlord owns a rent stream the tenant can choose to end at each expiry. Buyers price that choice, so the price per dollar of rent falls as the primary term runs down.

Store counts grow and shrink at the same time, and small towns have few second users for a closed box

Dollar General reported opening 589 stores, remodeling thousands more, relocating 47 and closing 290 in 2025, and its filing describes a fourth-quarter portfolio review that led it to close 141 stores, 96 of them Dollar General and 45 pOpshelf, in early fiscal 2025. It also says about 75% of the U.S. population lives within five miles of one of its stores, and describes its stores as low-cost, no-frills buildings in rural, suburban and urban communities.

A closed store in a small town is hard to re-let because the pool of retailers that want a building of that size in that place is thin. When you sell, the buyer's lender will look at the land value and the building's alternate uses, not only the rent, and the Family Dollar sale reminds buyers that the brand on the building can change hands. Ask your broker for the store's sales trend if the lease requires reporting, and expect buyers to ask whether the chain has closed other stores nearby.

The exchange itself is simple; the recapture on a newer store with cost-segregated site work is not zero

Treas. Reg. section 1.1031(a)-3 lists stores among buildings and paved parking areas among inherently permanent structures, so land, building and lot all qualify. Many dollar stores were built recently and bought by investors who ran cost segregation: Publication 946 puts land improvements such as paving and sidewalks in asset class 00.3 with a 15-year life, which makes them eligible for bonus depreciation.

On a cash sale, bonus depreciation taken on that site work above the straight-line amount is additional depreciation that section 1250 taxes as ordinary income, the straight-line portion of the building is taxed at up to 25%, and the remainder is capital gain. In a complete exchange none of that is recognized: section 1250(d)(4) limits the ordinary-income amount to the gain you actually recognize, provided the section 1250 property you acquire, meaning buildings and similar improvements rather than bare land, is worth at least the recapture amount. Exchanging a store for raw land alone can bring part of that recapture back.

Hypothetical: a store bought in 2023 for $1,500,000 with a $900,000 loan sells in 2026 for $1,600,000. To defer everything you need a replacement worth at least $1,600,000 and at least $900,000 of new debt or added cash, which our exchange equation guide explains. Run your own numbers with your CPA.

Who buys dollar stores and where the proceeds usually go

Net-lease REITs remain buyers. Agree Realty's 2025 Form 10-K shows dollar stores at 6.4% of its annualized base rent and Dollar General at 3.9%, in a portfolio that was 99.7% leased with a weighted average remaining term of about 7.8 years.

For a seller, the low price point is also the limit: one store rarely absorbs a larger exchange, and owning several concentrates you in one tenant. Common paths are a larger multi-tenant property, a diversified traditional DST, or a split between a direct purchase and a DST interest, which our page on splitting an exchange covers. Rev. Rul. 2004-86 is why a DST trustee cannot re-lease a store a tenant leaves except on bankruptcy, so look at the sponsor's master lease and reserves.

Buying a dollar store as replacement property: term, renewal rent, site and the brand before day 45

Measure the primary term against your own hold. If you will hold ten years and the lease has six left, you are buying a renewal you do not control. Read the renewal options for the rent they set, since flat renewals reduce the value of the later years, and check for any tenant right to terminate early.

Look at the site as if the tenant had left: the land value, the town's population and traffic, other retail nearby, and whether the building's size suits another user. Confirm who maintains the roof, structure and lot, because some dollar store leases are not fully triple net and the landlord keeps roof and structure.

Confirm the brand and guarantor. After the Family Dollar sale, a lease signed by that business is backed by a private company rather than the public parent, so ask who the guarantor is today. Use the three-property rule in Reg. section 1.1031(k)-1(c)(4) to identify backups, and compare against our pharmacy net lease page and single-tenant net lease page.